Page 36 - Five Forces of Americanisation Richard Hooke 04072025 final post SDR1

The UK Defence Industry in the 21 Century
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The Five Forces of Americanisation

The Five Forces of Americanisation
2. The US Defence Market

The US defence market remains the largest in the world. Its government spends over 37% of the world’s
total defence budget. The five largest defence companies in the world are headquartered there, with
their shares traded on the New York Stock Exchange. Together, they operate across the full spectrum
of defence and security, from air, land and sea to space and cyber. Whilst the new government has
voiced a policy of America First, the global scale of its defence and security posture, epitomised by its
reformed Defense Security Cooperation Agency, suggest that it will continue to play a leading role as
a principal actor in world military affairs, primarily, of necessity, as a participant in overseas
expeditionary operations as the “global partner of choice”.

British defence company CEOs regard the USA as a relatively open, accessible market with few barriers
to entry. Indeed, in almost every respect, it is more attractive than its home market in the UK.
• The Department of Defence spends a larger percentage of its equipment budget on development
than anywhere else in the world
• Its contracting arrangements provide suppliers with the transparency and visibility of future
earnings that support fundraising and liquidity. Together with its vast scale, the US defence market
also offers contractors the opportunity to earn superior operating margins
• US capital markets have generally been supportive of the defence industry. Its communities of
smaller public equity investors outside the main metropolitan areas have been responsive to small-
and mid-cap UK listed defence and security company fund-raising. The US private placement
market played a major role in enabling UK companies to sustain long-term liquidity during the
financial crisis between 2007-09. We might anticipate that the US financial sector might become
a more prominent component of US defence policy in future, given the appointment in March,
2025 of an experienced and highly successful financier as Deputy Defense Secretary
However, for foreign companies operating in the US, national security restrictions require certain issues
to be managed with an opacity that can frustrate decision making, particularly in allocating capital.
Now, in the first months of the new US government, Europe has been exhorted by an apparently
exasperated US to spend more on defence and to become more self-reliant. The EU has responded
swiftly, its strategy published in April, 2025: “Rearm Europe Plan: Readiness 2030”. A possible outcome
could be increased competition between US and EU contractors … many of whom already operate in
each others’ countries.

An F-35C drops a GBU-12 at the China Lake, California, test range.
Lockheed Martin photo by Darin Russell
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07/07/2025 Richard Hooke 2025